Over the last few months, Nepal has been gripped by some sensational headlines. We now learn that within the next five years Nepal will have excess electricity supply in the wet months. The challenge for Nepal, we are now discovering, is to find new markets for this excess supply.
Nepal is being encouraged to rapidly reorient its focus from its myopic short-term concerns about the inconveniences of 12 hours of daily power cuts to a long term view of what to do with the excess power.
These startling set of headlines stem from statements by Nepal Electricity Authority (NEA) about the likely power demand-supply balance over the next few years.
NEA contends that if all the plants with signed power purchase agreements (PPA) come on line as planned, the country will have excess supply in the wet months after July 2017. Once the larger plants such as Upper Tamakoshi, Middle Bhotekoshi and Rasuwagadhi come on line, NEA will need to dump about 1,000 MW for about 20 hours daily during the rainy seasons after 2018-2019.
Under the ‘take or pay’ terms of the existing PPA, NEA has to pay for the generated power even if there are no customers for that energy. The company projects that the lack of domestic demand for this excess generation will result in a daily loss of about Rs 150 million. As a result, NEA has stopped signing PPAs for additional generation.
The idea that there will be sufficient electricity within a few years, even if only for a few months, should be welcome news. But consider the implication of that assertion.
NEA demand estimates imply that within the next five years, Nepal’s annual average per-capita electricity demand will be less than 200 units (kWh). At the end of this decade (2020), electricity demand will be less than 500 units; at the end of the next decade (2030) it will still remain under 1,000 units per year.
By contrast, India’s per-capita electricity consumption is currently about 700 units annually. China’s is approximately 2,500 units annually; the global average is about 3,000 units annually. By that count, Nepal’s electricity consumption in the next two decades will remain lower than some of the most under-performing countries today. This is the sort of electricity demand growth for Nepal even though non-commercial energy currently accounts for about 85 percent of the country’s total energy consumption.
Nepal’s official demand forecast, developed by NEA, corroborated by experts and endorsed by government, relegates its people to a dismal future: decades more of poverty, perpetual low growth and a vision where people should be happy with a ‘tuki’ (crude lantern) for lighting and a wood-fired stove for energy. It leaves zero space for aspirations.
Critics prodding NEA to consider higher demand growth are being told that the analytical basis for these projections is robust. That Nepal is starting from a low base of economic growth and industrialization and it will be many decades before she can absorb higher levels of electricity.
The issue is not whether these estimates are right or wrong. The question is whether Nepalis have a right to aspire to a better future. The official endorsement of such low levels of electricity demand represents a collective collapse—a failure amounting to a betrayal by the current generation of all future generations.
First is the betrayal by Nepal’s political leadership. In the last election, all political parties ran on the platform of development. Several of them committed to developing 5,000 MW to 10,000 MW of new capacity. Where are those commitments now?
Political parties have fought over the smallest things. But when the future of Nepal is so fundamentally under challenge, there hasn’t even been a whimper of a protest.
To lead towards development, leadership has to first believe in the possibility of development.
Second is the betrayal by Nepal’s intelligentsia. They have failed to provide an alternate vision that challenges the status quo. They have preferred the analytical convenience of continuing with established trajectories instead of the more challenging methods of factoring in aspirations.
It is hard to fault political leadership for the absence of hope when the intelligentsia offers no scientific basis for it.
Third is the betrayal by Nepali families. Families take pride in ‘adjusting’. Businesses take pride in having survived. Kids are being taught to adjust to lives with long hours of darkness. Frustration is reprimanded as whiny and complaining. This generation of Nepalis has allowed the aspirations of future generations to slowly decay.
No child should have to grow up in a country where they are told that their lives will be worse off than their parents’.
Fourth is the betrayal by institutions such as NEA. As a company, NEA shouldn’t be faulted for its demand estimates. It has the obligation to protect itself against what it claims is certain bankruptcy. NEA has the right to believe in low future demand. But it must also be willing to get out of the way and let those that believe in higher demand take the risk and serve that demand, if it were to materialize.
Fifth is the betrayal by the private sector. They have sat stoically on the sidelines and watched the erosion of Nepali aspirations. They have focused singularly on generation and taken comfort in NEA as the only bankable electricity off-taker.
A private sector that is determined not to take risks is a country without hope.
Sixth is the betrayal by Nepal’s development partners, the main investment drivers of the country. They all have extensive investment strategies, built on sound research, analysis and reason. But their plans fail to tap the potential of Nepali aspirations. They reduce Nepalis to laboratory rats who do little more than demonstrate a Pavlovian reaction to incentives placed in the corner of the cage.
By investing solely in continuity and incremental change, they have left little room for the possibilities arising from Nepali aspirations.
There is, however, a way in which this collective collapse, this betrayal of future generations, can be reversed. It is by allowing risk takers and believers to connect directly with the rewards of taking risks. In Nepali electricity markets, this could play out in one of two ways.
First, though NEA has the right to its demand estimates, it must be held accountable. It must have an ‘obligation to serve.’ If there is any unmet demand during the hours where it claims to have sufficient supply, it must be willing to pay a compensation for every unit of unmet demand.
Second, if NEA is unwilling to subscribe to a firm ‘obligation to serve,’ it must make way for others who are willing to take demand risks. There are several mechanisms that could be put in place. One approach would be to allow new entities to serve that portion of demand above what NEA has estimated as its load.
Whatever the mechanism, this generation of Nepalis shouldn’t be able to simply write off the prospects of future generations. Political parties have committed to delivering a constitution within a year. There will be little meaning in the constitution of a country where its government believes the country has no future.
Source : Republica